Bank Regulation
National Institute Welcomes Plan to Increase Capital in Banks
The plan to increase core Tier 1 capital in banks was welcomed by Ray Barrell, Director of macroeconomics at the National Institute. He said that the increase in capital would reduce the risks of a banking crisis noticeably as Institute research used by the Financial Stability Board had shown. Banking crises have depressing similar determinants in all OECD countries, and stronger capital will reduce the risks. The other factors driving crises need to be addressed.
Institute work on causes and consequences of cries as well as on bank capital in
on these topics have been cited by the FSB.
The Institute work was presented at an ESRC seminar in NIESR on the 9th June 2010. It was summarised in the National Institute Economic Review in July 2010.
Professor Barrell said that the increase in capital was just the first step toward better regulation. The next step was provisioning against the causes of crises. The FSB has suggested dynamic provisioning against credit growth. National Institute work has suggested this will not be as effective as dealing with housing market bubbles. The Institute submission to the FSB is
The most important step ahead was greater product regulation in financial markets. Reducing complexity and off-balance sheet activity are essential if crises are to be avoided. More capital alone is not enough. Discussion Paper 357 argues that stronger product regulation is needed.
Westminster Economics Forum Seminar
Title: "Should we shut the stable door before the horse bolts again"
Date: 9th June 2010, 1.00pm
Speaker: Prof. Ray Barrell , NIESR, Director of Macroeconomic Research and Forecasting
Chair: Dr Sushil Wadhwani, CBE
Venue: National Institute of Economic and Social Research, 2 Dean Trench Street, Smith Square, London, SW1P 3HE
PowerPoint - "Should we shut the stable door before the horse bolts again" by Professor Ray Barrell
A summary by Paul Wallace of The Economist